2005 Ruling 2005-0113361R3 - Paragraph 149(1)(c) ruling.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether paragraph 149(1)(c) will apply to exempt the business income earned by a Society from XXXXXXXXXX . The issue is twofold: can the Society be considered a "public body" and can it be considered to be "performing a function of government".

Position: Yes.

Reasons: Based on the facts, the Society can be considered a public body and, since it is involved in negotiating a treaty, among other things, it can be considered to be "performing a function of government" pursuant to our established policy in this regard.

XXXXXXXXXX 		2005-011336

XXXXXXXXXX, 2005

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Society")

We are writing in response your letters dated XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the Society. We also acknowledge the additional information sent to us by facsimile on XXXXXXXXXX and the information provided during our various telephone conversations (XXXXXXXXXX).

To the best of your knowledge and that of the Society, none of the issues involved in the ruling request is:

i. in an earlier return of the Society or a related person;

ii. being considered by a tax services office or a tax centre in connection with a tax return already filed by the Society or a related person;

iii. under objection by the Society or a related person;

iv. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and

v. the subject of a ruling previously issued by the Directorate to the Society or a related person.

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated.

Our understanding of the facts, the proposed transactions and the purpose of the proposed transactions is as follows:

Facts

1. The Society was incorporated on XXXXXXXXXX under the Societies Act (XXXXXXXXXX ) as the XXXXXXXXXX.

2. The mailing address of the Society is XXXXXXXXXX, and its head office is located on the XXXXXXXXXX Reserve. The First Nation is served by the XXXXXXXXXX Tax Services Office and files its returns with the XXXXXXXXXX Tax Centre.

3. The Society represents all of the XXXXXXXXXX people (the "First Nation"), which includes the members (the "Members") of the XXXXXXXXXX (the "Bands") (within the meaning of the term "band" as defined in subsection 2(1) of the Indian Act):

XXXXXXXXXX.

4. Each of the Bands has a "reserve" or "reserves," hereinafter referred to collectively as the "Reserves," within the meaning of this term as defined under subsection 2(1) of the Indian Act.

5. Although the First Nation has been organized into the above-mentioned bands by the Government of Canada ("Canada"), the Society operates on a hereditary chief basis which recognizes the clans and their traditional territory (the "Traditional Territory"). The Traditional Territory encompasses approximately XXXXXXXXXX square kilometers.

6. The directors of the Society are hereditary chiefs XXXXXXXXXX and are empowered to act on behalf of the First Nation XXXXXXXXXX.

7. Since the hereditary chiefs represent the clans, the Society represents not only those Members resident on the Reserves, but also those Members residing off-reserve and non-registered First Nation people.

8. The Society was incorporated in order to establish a legal entity which could enter into agreements and negotiate treaties, the management of natural resource and other matters on behalf of the First Nation. This is expressed in its constituting documents, which state that the purpose of the Society is:

? to coordinate and administer treaty negotiations with the Government of XXXXXXXXXX and the Government of Canada ("Canada") on behalf of the First Nation;
? as part of the treaty negotiations, to promote the involvement of the First Nation in the conservation, management and sustainable development of the natural resources in the Traditional Territory;
? to develop programs and services for land and resources, human services, health, education, justice and economic development; although most of these programs are directed to Members, certain child development programs are available to all those who require the services, regardless of whether they have First Nation background or not;
? to promote, preserve and enhance the First Nation culture and traditions;
? to protect the Traditional Territory;
? to build the infrastructure and capacity in personnel and assets as necessary for the coordination and administration of the treaty negotiations; and
? to raise funds to support the purposes of the Society and activities with respect to the purposes of the Society.

9. The strategic goals of the Society are as follows:

? to ensure a self reliant First Nation;
? to ensure an effective, responsive and accountable infrastructure;
? to ensure continual and effective communications;
? to ensure responsible jurisdiction and oversight of resources for equitable and sustainable use;
? to ensure effective financial management; and
? to ensure a governance model based upon the solid foundation of the First Nation hereditary system.

10. The Society acts as a national government with respect to treaty matters and certain programs of the First Nation. However, the Society represents only XXXXXXXXXX of the Bands in treaty negotiations, i.e., XXXXXXXXXX.

11. Although the Society does not represent XXXXXXXXXX in treaty negotiations, these bands retain a relationship with the Society under the hereditary governance structure and, through the chief, XXXXXXXXXX, are thus otherwise represented by it in other matters.

12. The bands that are represented by the Society in treaty negotiations with Canada and XXXXXXXXXX have a combined total of XXXXXXXXXX reserves and, based on the most recent data from Indian and Northern Affairs Canada, have a registered population of XXXXXXXXXX Members of which XXXXXXXXXX are resident on the Reserves. In addition, the Society represents approximately XXXXXXXXXX Members from the other XXXXXXXXXX bands.

13. The treaty negotiations, which includes XXXXXXXXXX.

14. The Society receives support funding for treaty negotiation from the XXXXXXXXXX.

15. XXXXXXXXXX.

16. The Society has entered into a Protocol Agreement with XXXXXXXXXX, Canada, XXXXXXXXXX, to facilitate and guide the particular parties in discussions to identify and implement mutually beneficial programs and economic activities.

17. The Society has entered into an agreement with XXXXXXXXXX and Canada entitled "XXXXXXXXXX," hereinafter referred to simply as the "Accord," to work collaboratively with respect to land and resources, economic initiatives and associated First Nation capacity and training needs, and to recognize the First Nation's involvement in the following areas:

? lands and resources planning;
? the protection of environmental, cultural, spiritual, historical and other First Nation values; and
? First Nation economic initiatives.

18. The Society provides and/or administers an extensive list of social services and economic and resource based programs including:

? treaty negotiations;
? First Nation trust fund management;
? family support services;
? cultural camps;
? aboriginal justice programs;
? youth services;
? community services;
? child development services;
? health services;
? economic development;
? tourism;
? land and resource programs; and
? fisheries and wildlife.

19. The Society's programs are primarily funded by government agencies which include:

? XXXXXXXXXX;
? XXXXXXXXXX;
? XXXXXXXXXX;
? XXXXXXXXXX;
? Federal Justice Department;
? XXXXXXXXXX;
? XXXXXXXXXX;
? Department of Indian Affairs and Northern Development;
? XXXXXXXXXX;
? XXXXXXXXXX; and
? Federal Department of Fisheries and Oceans.

20. XXXXXXXXXX.

Proposed Transaction

21. The Society proposes to acquire the XXXXXXXXXX and enter into the business of XXXXXXXXXX.

Purpose of the Proposed Transaction

The purpose of the proposed transaction is to generate profits to:

? provide additional long-term sources of funds to help finance the Society's governance obligations;
? promote economic development activities for the Society's members; and
? afford employment, education and training opportunities for First Nation people.

Ruling

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction, we rule as follows:

The Society is a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act and, accordingly, no Part I tax will be payable by the Society on any income from the proposed transaction described in paragraph 21 above.

The above advance income tax ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular IC 70-6R5, dated May 17, 2002, and is binding on the Canada Revenue Agency provided the proposed transactions are implemented before XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
Director
Financial Industries Division
Income Tax Rulings Directorate

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